What the 24-Cent Credit Says About Netflix

I got a puzzling email last night from Netflix (Nasdaq: NFLX  ) : "We're sorry you may have had trouble watching instantly."

Thing is, I didn't have trouble watching instantly. I didn't log onto Netflix Tuesday night at all. Yet the note began:

Dear Brian,

Recently you may have had trouble instantly watching TV episodes or movies due to technical issues.

We are sorry for the inconvenience this may have caused. If you attempted and were unable to instantly watch TV episodes or movies yesterday, click on this account specific link [link redacted] in the next 7 days to apply a credit to your next billing statement. The credit will be 3% of our $7.99 a month plan that lets our members instantly watch unlimited TV episodes and movies. Credit can only be applied once.

A little Web research popped up this Bloomberg piece, explaining that "Netflix, the online hub for renting movies and television shows, said its website unexpectedly crashed, leaving subscribers unable to order DVDs or play films."

The Washington Post says the outage "lasted a couple hours ... with users reporting problems streaming Netflix on their computers, consoles, set-top boxes and mobile devices." Again, I wasn't among this group.

The 3%
So who cares about 3% of $7.99? At $0.24, it seems like an absurdly low offer -- couldn't even buy a vending machine candy bar.

Yet, it's logical. The streaming-only Netflix subscription costs $7.99 a month. March has 31 days in it, which means users pay about $0.26 a day for their Netflix service. Even though the outage "lasted a couple hours," streaming-only users are essentially being reimbursed for a full day of service.

In that light, the 24-cent offer seems more than fair. Perhaps Netflix needed to sell it a little better -- instead of bogging down in the "3% of $7.99" minutia, it could have simply said it was reimbursing users nearly a full day's worth of their streaming subscription.

The larger point here is that Netflix does its best to take care of customers. My own anecdotal experiences with Netflix customer service have left me impressed; others seem to agree. Netflix recently ranked No. 2 among e-retailers -- a single point behind No. 1 Amazon.com (Nasdaq: AMZN  ) -- in a customer satisfaction report from The American Customer Satisfaction Index and ForeSee Results.

Happy customers often result in loyal customers, and Netflix was ranked No. 1 overall in a survey of brand loyalty. According to MediaDailyNews:

Robert Passikoff, founder and president of Brand Keys, said he was surprised to see Internet and DVD video rental service Netflix rank No. 1 among the 530 brands tracked in the latest edition of the Brand Keys Customer Loyalty Engagement Index. ... Passikoff said the 2011 survey was the first in which Brand Keys included the video rental category, and that Netflix delivered the best overall attributes of any brand, delivering a level of consumer expectation that Passikoff described as "delighting" its consumers.

How does Netflix do that? By offering people like me unsolicited apologies and a 24-cent credit when we didn't even know its service was down.

Interested in getting the latest news & commentary on Netflix? Click here to add Netflix to My Watchlist!

Fool.com managing editor Brian Richards does not own shares of Netflix or Amazon, which are both Stock Advisor recommendations.


Read/Post Comments (15) | Recommend This Article (13)

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  • Report this Comment On March 24, 2011, at 2:05 PM, passa3m wrote:

    Really? Are you kidding? I'm surprised that you decided to take this challenge on. Let me get this straight...you are saying that Netflix stepped up and did the right thing because they are offering a credit of 24 pennies!!!? Wow! Your obvious conflict of interest is blinding you. Let me ask you just how many of shares you own long???

  • Report this Comment On March 24, 2011, at 2:10 PM, TMFBrich wrote:

    @passa3m,

    As it says in the story: <<Fool.com managing editor Brian Richards does not own shares of Netflix>>.

    What would I be blinded to?

    -Brian Richards

  • Report this Comment On March 24, 2011, at 2:17 PM, dargus wrote:

    What exactly do you want Netflix to offer, passa3m? This offer was made to everyone, although it did state "if" you were inconvenienced you should accept it. I wasn't and I didn't. I see no reason for them to offer a credit of much greater value than the loss to the customer, especially when customers who suffered no loss at all were offered the opportunity to opt in by being dishonest about their actual experience.

  • Report this Comment On March 24, 2011, at 2:18 PM, Pandorabelle wrote:

    This is totally NFLX ADVERTISING and P.R.

    It's another way to get their name in your face as "trying to do the right thing."

    It's a B.S. ploy to get your attention and apprioval.

    Look deeper, grasshoppers............

  • Report this Comment On March 24, 2011, at 2:22 PM, stever1245 wrote:

    Why don't they just apply the 24 cents to your account. Who wants to go their website and try to figure out how to claim your 24 pennies. It pissed me off so much that I cancelled my subscription today.

  • Report this Comment On March 24, 2011, at 2:25 PM, TMFBrich wrote:

    @steve1245,

    <<Who wants to go to their website and try to figure out how to claim your 24 pennies.>>

    You just had to click a link and credit was automatically issued. No signing in, pushing any buttons, or anything else of the sort.

    Why'd you cancel: Because you were unhappy with the outage or offended by being offered 24 pennies?

    -Brian Richards

  • Report this Comment On March 24, 2011, at 2:27 PM, TMFBrich wrote:

    @Sundolly,

    <<This is totally NFLX ADVERTISING and P.R.>>

    Well, yeah. Faced with the bad P.R. of having their streaming site go down for a couple of hours, they offered a day's credit to people who were inconvenienced. They tried to right a P.R. wrong.

    -Brian Richards

  • Report this Comment On March 24, 2011, at 2:36 PM, Acesnyper wrote:

    I see nothing wrong with it.

    I've been too busy as of late to use my netflix, so I get a quarter for not even noticing a service problem.

    Fine with me.

    Been happy as a share holder and user.

  • Report this Comment On March 24, 2011, at 2:38 PM, TMFKris wrote:

    I started a free Netflix one-month trial in the past few days and I was aware of the streaming outage. A temporarily broken product wasn't helping me make up my mind to continue Netflix. In an email, Netflix apologized for the inconvenience and offered to extend my free trial by a day. It's a nice (unexpected) gesture. I'm more interested in how often there are streaming outages?

    Kris -- TMF copy editor; I don't own shares of Netflix

  • Report this Comment On March 24, 2011, at 2:44 PM, meade78 wrote:

    Good grief, people! What do you want?! Of course it's public relations. It's what any good retailer does when something goes wrong. You try to do the right thing for the customer. Should they give everyone a month free instead or something? I don't think so. Just sayin'...

  • Report this Comment On March 24, 2011, at 5:22 PM, tecon wrote:

    Tell me passa3m, ever received a credit from at&t for a dropped call?

  • Report this Comment On March 24, 2011, at 6:09 PM, bomberoKev wrote:

    My girlfriend once accidentally mailed back some DVDs from the public library to Netflix. Not only did they mail them back to us, they credited her a month's fees to cover the late fees at the library. So two years later I'm happy customer and a very happy shareholder. This sounds like more of the same good customer service. It may not sound like much, but 24 cents times several million subscribers is a lot of money. Compare this to Skype's response to their outage (less money for a more critical disruption, if I recall), and it looks pretty good.

  • Report this Comment On March 25, 2011, at 9:44 AM, rws1773 wrote:

    Sounds like there are a few bitter Blockbuster fans on this board. Netflix is a great company. I'm not a shareholder, but I sure wish I was. I am a loyal customer though.

  • Report this Comment On March 25, 2011, at 10:18 AM, wyrdmage wrote:

    At first blush, offering a 24 cent credit is weird -- I agree that they should have explained what it represents in more palatable terms. As an investor, I have made a lot of money with NFLX because people keep underestimating just how pleasing the Netflix services are. NFLX stock price keeps getting "too high to buy", and I predict that it will continue to rise for a very long time. As weird as a 24 cent credit is, it is a far cry better than what NFLX competitors do.

  • Report this Comment On March 25, 2011, at 10:31 AM, TMFBrich wrote:

    @TMFKris,

    <<I'm more interested in how often there are streaming outages?>>

    In researching this article I couldn't find many other examples of systemwide outages, so I'd say "rare."

    Best --

    Brian

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